The euro advanced to a one-week high against the dollar as European leaders signaled they will do what is necessary to aid debt-strapped regional nations. The 17-nation currency strengthened versus most of its 16 major counterparts, appreciating against the dollar for a fourth day. The European Union proposed a financial-transactions tax to take effect in 2014 and Finland’s parliament approved an expansion to the region’s rescue fund. The yen headed for a fifth consecutive monthly gain versus the euro as investors purchased the currency as a refuge. “All of these small signs of cooperation are creating a more constructive risk attitude and that’s why the euro is holding its own,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “But until we get a structural resolution to the Greek problem, I still think you’re not going to have too much upside potential in the euro.” The shared currency appreciated as much as 0.8 percent to $1.3690, the strongest intraday level since Sept. 21, before trading at $1.3613 as of 9:20 a.m. in New York. The euro down 0.2 percent to 104.11 yen, on course for a 6.4 percent decline so far this month. Japan’s currency gained 0.4 percent to 76.47 per dollar. Euro Drop The euro has fallen 1.7 percent in past three months against nine developed-market peers, taking its 12-month decline to 2.3 percent, according to Bloomberg Correlation Currency Indexes. The yen has strengthened the most among the nine currencies in the last three months, rising 11 percent, and the dollar gained 4.2 percent. The EU’s financial-transaction tax would set minimum tax rates for transactions throughout the 27-nation EU, the European Commission, the bloc’s Brussels-based executive, said in a statement. The proposal would apply a tax of 0.1 percent on trading of stocks and bonds, with a 0.01 percent rate for derivatives contracts. Spot foreign exchange trades would not be covered by the tax, while currency derivative contracts are included. The tax would raise about 57 billion euros ($78 billion) a year and would “ensure that the financial sector makes a fair contribution at a time of fiscal consolidation,” the commission said in the statement. Finland’s parliament approved the expansion of the 440 billion-euro European Financial Stability Facility, bringing to nine the number of euro members to have ratified the mechanism. An expanded role of the EFSF was agreed to by euro zone members on July 21 and must be ratified by all member states. Greek Talks The E refuted reports that euro-area nations are pushing for private Greek bondholders to accept larger write downs. The commission was unaware of discussions reported by the Financial Times yesterday that some euro-area nations wanted private Greek bondholders to accept bigger losses. German Chancellor Angela Merkel said she’s waiting for a report from a team of officials from the European Union, European Central Bank and International Monetary Fund on Greece’s progress before deciding whether a second financing package for the country agreed on July 21 needs to be revised. “We need to wait to see what the expert mission, the troika, determines and what it will say in relation to whether there needs to be new talks or not,” Merkel told Athens-based state broadcaster NET in an interview. Germany Stance Germany still privately anticipates that the Mediterranean nation will default on its debt as early as this year, Bild reported Merkel as saying earlier at a meeting of Christian Democratic lawmakers, citing unidentified participants. “The focus is still very much on matters in Europe and the progress being made to resolve the debt crisis,” said Gavin Friend, a markets strategist at National Australia Bank Ltd. in London. “The yen is finding support from the safe-haven bid.” Japan’s currency may climb to as strong as 75 per dollar “within weeks” as investors continue to purchase the currency as a hedge against financial market turmoil stemming from the euro-area debt crisis, Friend said. China’s yuan climbed after the People’s Bank of China set its daily reference rate at the strongest level since July 2005. The nation’s consumer prices rose 6.2 percent in August from a year earlier after a 6.5 percent increase in July. “Today’s fixing reflects China’s determination to tame inflation with a stronger currency,” said Edmond Law, deputy head of foreign exchange at BWC Capital Markets in Hong Kong. “The inflation slowdown in August was matched by the yuan’s gain for the same period. Yuan appreciation has proved useful in reining in prices.” The yuan strengthened to 6.3938 per dollar from 6.3992, the biggest gain since Sept. 16. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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